NU­CLEAR BALL ROLLS IN JUNE

CityPress - - Front Page - SIPHO MASONDO sipho.masondo@city­press.co.za

A con­fi­den­tial doc­u­ment re­veals that South Africa’s nu­cle­ar­build pro­gramme kicks off in earnest in June when Eskom is­sues a for­mal re­quest for pro­pos­als from com­pa­nies bid­ding for the es­ti­mated R1 tril­lion con­tract.

The nu­clear deal – for which Rus­sian com­pany Rosatom is widely con­sid­ered to be the fron­trun­ner – is, say se­nior Trea­sury of­fi­cials, “di­rectly re­lated” to Pres­i­dent Ja­cob Zuma’s ax­ing of fi­nance min­is­ter Pravin Gord­han and his deputy Mce­bisi Jonas.

“It is well known that Gord­han was against the project as he said the coun­try couldn’t af­ford it. Eskom will be is­su­ing a re­quest for pro­pos­als in June and that re­ally is the be­gin­ning of pro­cure­ment. Gord­han had to go be­cause he was go­ing to block it again,” said a se­nior of­fi­cial.

The in­ter­nal Eskom doc­u­ment dated three days be­fore Gord­han and Jonas were axed re­veals a tight time­line for the pro­gramme that will see four plants built to pro­vide 9 600 megawatts of elec­tric­ity to the coun­try. The re­quest for in­for­ma­tion process has al­ready been is­sued and closes on April 28. Af­ter the re­quest for pro­pos­als is is­sued in June, the dead­line for bids is Septem­ber, for eval­u­a­tion in De­cem­ber. The win­ning bid­der will be de­cided in March 2018 and the con­tract signed be­tween De­cem­ber next year and March 2019. The doc­u­ment also re­veals that most of the ma­jor nu­clear con­tracts will be im­ple­mented through “turnkey” pro­cure­ment, which Trea­sury of­fi­cials are con­cerned about. “While Trea­sury al­lows for turnkey pro­cure­ment, we know that it is of­ten used to hide cor­rup­tion. Com­pa­nies that are asked to de­liver turnkey projects are ac­count­able to them­selves. They ap­point who­ever they like, how­ever they like,” a se­nior of­fi­cial said. Turnkey projects are when a sin­gle com­pany is ap­pointed to man­age and de­liver an en­tire project. The man­age­ment com­pany be­comes re­spon­si­ble for ap­point­ing all con­trac­tors and ser­vice providers. This is dif­fer­ent from an open ten­der that is spread over a range of dif­fer­ent con­trac­tors ap­pointed by the state.

Eskom spokesper­son Khulu Phasiwe said Eskom had al­ways em­braced be­ing the owner and op­er­a­tor of nu­clear plants.

“The fo­cus in the next two years will be to go out on a re­quest for pro­posal sub­ject to the req­ui­site au­tho­ri­sa­tions ob­tained. It is pos­si­ble that the re­quest could be is­sued by the end of June, with se­lec­tion of pre­ferred ven­dors by the first quar­ter of 2018,” he said.

“This is de­pen­dent on the rel­e­vant ap­provals from Eskom be­ing ob­tained, as well as the gov­er­nance pro­cesses of the SA Nu­clear En­ergy Cor­po­ra­tion (Necsa) and rel­e­vant gov­ern­ment de­part­ments. It is pos­si­ble the pre­ferred bid­der would be se­lected by the first quar­ter of 2018.”

Zuma’s spokesper­son Bongani Nqu­lunga said the pres­i­dency was “un­aware of the June date for the is­su­ing of the re­quest for pro­pos­als for nu­clear en­ergy, nor does it get in­volved in the pro­cure­ment pro­cesses of other state en­ti­ties. Nu­clear en­ergy will be im­ple­mented at the scale and pace that is af­ford­able. This po­si­tion has not changed.”

Mean­while, a con­fi­den­tial le­gal opin­ion Trea­sury com­mis­sioned re­veals how Gord­han and Jonas blocked the de­part­ment of en­ergy from procur­ing the nu­clear deal di­rectly from for­eign gov­ern­ments through closed bids.

The opin­ion, pre­pared by Ad­vo­cate Kameshni Pil­lay SC and Ad­vo­cate Nyoko Mu­van­gua in March last year, shows that the South African gov­ern­ment wanted to pro­cure nu­clear plants di­rectly through in­ter­gov­ern­men­tal agree­ments with for­eign gov­ern­ments. It also shows that in March last year, the de­part­ment had al­ready pre­qual­i­fied and se­lected five coun­tries – Rus­sia, the US, France, Ja­pan and Korea – to sub­mit bids or pro­pos­als. This would have con­tra­vened the Public Fi­nance Man­age­ment Act.

The de­part­ment aban­doned its pro­posed pro­cure­ment regime af­ter a sting­ing cri­tique by the lawyers. A se­nior Trea­sury of­fi­cial said Gord­han’s in­sis­tence on do­ing ev­ery­thing by the book prompted the Pres­i­den­tial State-Owned Com­pa­nies Co­or­di­nat­ing Coun­cil, headed by Zuma, to rec­om­mend the project be handed to Eskom. Cabi­net rat­i­fied the de­ci­sion in Oc­to­ber last year.

The Trea­sury ex­ec­u­tive said his former po­lit­i­cal bosses so­licited the opin­ion fol­low­ing sharp dis­agree­ments be­tween them and the de­part­ment of en­ergy about the nu­clear build pro­gramme’s in­tended pro­cure­ment process.

“The de­part­ment of en­ergy would have taken the bid doc­u­ments to the em­bassies of the pre­qual­i­fied coun­tries, and not spe­cific com­pa­nies in those coun­tries. No­body would have known that pro­cure­ment had com­menced,” the of­fi­cial said.

The opin­ion said the de­part­ment of en­ergy’s pro­cure­ment strat­egy would have led to the “con­clu­sion of gov­ern­ment-to-gov­ern­ment con­tracts” that do “not fea­ture in the le­gal pro­cure­ment frame­work”.

“[This] will have the ef­fect of plac­ing the rel­e­vant gov­ern­ments in po­si­tions of power to de­cide in­de­pen­dently on sup­pli­ers, and this would con­tra­dict pro­cure­ment prin­ci­ples,” it says.

The opin­ion also says that, at the time of its com­pi­la­tion, the de­part­ment had al­ready pre­qual­i­fied and en­tered into in­ter­gov­ern­men­tal agree­ments with Rus­sia, the US, France and Korea for the nu­clear project.

In re­sponse, the de­part­ment stated that South Africa was bound by its in­ter­na­tional obli­ga­tions as a mem­ber state to the In­ter­na­tional Atomic En­ergy Agency and that in­ter­gov­ern­men­tal re­la­tions should be en­tered into with coun­tries that are sig­na­to­ries to the Nu­clear Non-Pro­lif­er­a­tion Treaty.

The de­part­ment said the ar­range­ment would be “trans­par­ent be­cause it will be the out­come of a com­pet­i­tive ten­der process, and not the re­sult of bi­lat­eral ne­go­ti­a­tions”.

Fol­low­ing the cri­tique, the de­part­ment pro­duced a new pro­cure­ment strat­egy with a “fun­da­men­tal shift to­wards a com­pet­i­tive bid­ding process, al­beit with a few con­cerns,” said the lawyers in a fol­low-up le­gal opin­ion in June last year. Trea­sury has de­clined to com­ment. The de­part­ment of en­ergy said it had de­cided with Eskom and Necsa to rec­om­mend to Cabi­net that the last two take over as owner-op­er­a­tors and pro­cur­ers of the nu­clear build pro­gramme.

“The de­part­ment’s de­ci­sion was based on a le­gal opin­ion about [its] le­gal com­pe­tency to pro­cure and com­pli­ca­tions that would arise re­gard­ing the nu­clear site ap­pli­ca­tions if the pro­curer [the de­part­ment] was dif­fer­ent from the li­censee and owner-op­er­a­tor of the power plants [Eskom]. The le­gal opin­ion noted that the de­part­ment is not em­pow­ered by law to di­rectly pro­cure on be­half of other ju­ris­tic en­ti­ties, which are also or­gans of state, and against their will or with­out their con­sent,” the de­part­ment said.

From our un­der­stand­ing of the doc­u­ment, it seems as if the pre­qual­i­fi­ca­tion process has al­ready taken place.

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